Iran sanctions update, May 13th, 2010

May 13th, 2010

Iran sanctions update

Dear ORIA Member:

Our Washington Council informed us of a few interesting events that happened yesterday related to the pending Iran sanctions bill.

First, the Government Accountability Office released a report that identifies seven non-U.S. companies with investments in Iran’s energy sector that have received millions of dollars in U.S. government contracts. The report was the subject of a Senate Homeland Security and Government Affairs Committee hearing today, and appears likely to be yet another factor that will influence Congress in favor of passing an Iran sanctions bill in the coming weeks. The GAO report is attached.

GAO’s report said Repsol of Spain, Total of France, ENI of Italy, PTT Exploration and Production of Thailand, and three South Korean companies — Daelim Industrial Co., Hyundai Heavy Industries, and GS Engineering and Construction – received $879 million to fulfill U.S. government contracts from 2005 to 2009. Nearly three-fourths of that money went to Repsol and Total. This report follows a March GAO report that identified 41 foreign companies known to have invested in Iran’s energy sector.

The new GAO report led many committee members to argue that U.S. sanctions law needs to be tightened to prevent the U.S. government from entering into contracts with companies invested in Iran’s energy sector, and many promised that such legislation would soon be passed. Also during the hearing, Committee Chairman Joseph Lieberman (I-CT) said Congress will focus on sanctioning the Iran Revolutionary Guard Corps, and Sen. Scott Brown (R-MA) said he is exploring legislation that would deny U.S. entry visas to foreign companies that invest in Iran’s energy sector.

Separately, several industry representatives today spoke out against the pending Iran sanctions bill by noting that unilateral sanctions would not be effective, and instead would reduce U.S. exports and hurt U.S. job creation. Some also argued that U.S. sanctions would hurt efforts to win a UN sanctions package against Iran, since U.S. sanctions would likely hit Russian and Chinese companies, which would make it difficult for the U.S. to win the support of Russia and China for UN sanctions.

In the industry discussion, at a program sponsored by Global Business Dialogue, Christopher Wenk of the U.S. Chamber of Commerce distributed a May 6 letter that the Chamber sent to the chairmen of the Senate Banking and House Foreign Affairs Committees that called on them to scale back the sanctions proposals now under consideration. Among other things, the letter asked members eliminate language that would prevent U.S. companies from doing business with sanctioned foreign partners, narrow the language to ensure that sanctions only affect entities involved in Iran’s energy sector (not parent companies), and exempt foreign export credit agencies from sanctions. A copy of the Chamber’s letter is also attached to this email.

The industry dialogue also raised the interesting question of how exactly the Obama Administration hopes to combine possible multilateral sanctions with unilateral measures. As you know, President Obama said earlier this year that a UN sanctions agreement could serve as a platform for unilateral measures. But Bill Reinsch, president of the National Foreign Trade Council, said he doubts that China in particular would agree to language in a UN agreement that authorizes countries to go beyond whatever multilateral sanctions are agreed. This leaves open the question of whether and how unilateral sanctions might be pursued after a UN deal (although at this point, Congress is obviously acting as if all UN actions are irrelevant to what it does legislatively). Reinsch also downplayed the idea that the Obama Administration might be able to issue an executive order related to Iran sanctions in an effort to blunt congressional efforts to pass a bill, and said it might be “too little too late” to pursue this strategy.

As you know, the House has targeted the end of May for the conclusion of the House-Senate conference committee on the bill, and the House is hoping to have a legislative proposal that House conferees can support by the end of this week. Several people said today that it is still unclear what the final bill might look like or when passage of the bill could be expected.

We will continue to monitor these events and provide updates when needed.

Best regards,

Lucille J. Laufer
Executive Director

The Oriental Rug Importers Association, Inc.
100 Park Plaza Drive
Secaucus, New Jersey 07094
Tele: (201) 866-5054
Fax: (201) 866-6169

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